You Haven't Earned the Right
Khosla: 90% of investors add no value in my assessment. 70% of investors add negative value to a company. That means they're advising a company when they haven't earned the right to advise an entrepreneur.
Some of the junior people here ask me — at this other firm, young people are going on boards, can I be on a board? I say: you haven't earned the right to advise an entrepreneur. Just because you got an MBA and joined a venture firm doesn't mean you're qualified.
70% of investors add negative value. They haven't earned the right to advise an entrepreneur.
Have You Felt How Hard It Is?
Khosla: The biggest piece of it — have you built a large company? Have you gone through how hard it is, how uncertain, how traumatic? This morning I was talking about how many times we almost worried about making payroll at Sun. Or going bankrupt. Plenty of times. More than two.
There was probably a month or two when the earliest I went home was 3 AM and the latest I was back in the office was 7 AM. Unless you've felt that gut-wrenching decision, you can't advise an entrepreneur.
Earliest home: 3 AM. Latest back: 7 AM. Unless you've felt that, you can't advise an entrepreneur.
Board Members Who've Never Made Hard Tradeoffs
Khosla: I hate board members who sit in a board meeting and say — can you improve quality? And five minutes later — can you ship faster? And five minutes later — spend less money. They've never gone through really hard tradeoffs and how uncertain it is.
If somebody's never dealt with decision-making under ambiguity and they're in a big company — they're not qualified to help you. If you have a marketing problem, do you ask somebody who's done marketing at IBM? They've never dealt with things where the market isn't established. 5% improvement year-to-year is what they're shooting for. They're not qualified to invent whole new markets.
Improve quality. Ship faster. Spend less. They say all three in one meeting. They've never made a real tradeoff.
Pick the Best Athlete, Not the Most Experienced
Khosla: Who to trust on what topic is the single hardest decision an entrepreneur makes. It's also where the right investors can really help you.
I had an argument last week with a co-investor in a healthcare company. They wanted this healthcare person who'd never dealt with change beyond 2% a year. I'm like — experience doesn't matter. The rate of learning matters. First-principles thinking matters. Pick the best athlete, not the person who's the most established wide receiver who knows how to run one pattern and one pattern only.
Experience doesn't matter. Rate of learning matters. First-principles thinking. Pick the best athlete.